Privatising National Oil Companies: Assessing the Impact on Firm Performance

Cambridge Judge Business School Working Paper No. 02/2008

39 Pages Posted: 30 Jan 2008 Last revised: 8 May 2008

Christian O. H. Wolf

University of Cambridge - Judge Business School

Michael G. Pollitt

University of Cambridge - Judge Business School

Date Written: February 29, 2008

Abstract

This study empirically investigates the impact of privatisation on firm performance in the global oil and gas industry, where questions of resource control have regained widespread attention. Using a dataset of 60 public share offerings by 28 National Oil Companies it is shown that privatisation is associated with comprehensive and sustained improvements in performance and efficiency. Over the seven-year period around the initial privatisation offering, return on sales increases by 3.6 percentage points, total output by 40%, capital expenditure by 47%, and employment intensity drops by 35%. Many of our observed performance improvements are already realised in anticipation of the initial privatisation date, accrue over time, and level off after the initial ownership change rather than accelerate. Details of residual government ownership, control transfer, and size and timing of follow-on offerings provide limited incremental explanatory power for firm performance, except for employment intensity. Based on these results partial privatisations in the oil sector might be seen to capture a significant part of the performance improvement associated with private capital markets without the selling government having to cede majority control.

Keywords: Privatisation, ownership, corporate performance, efficiency, oil and gas industry

JEL Classification: C23, G32, L33, L71, M20, Q40

Suggested Citation

Wolf, Christian O. H. and Pollitt, Michael G., Privatising National Oil Companies: Assessing the Impact on Firm Performance (February 29, 2008). Cambridge Judge Business School Working Paper No. 02/2008. Available at SSRN: https://ssrn.com/abstract=1088327 or http://dx.doi.org/10.2139/ssrn.1088327

Christian O. H. Wolf (Contact Author)

University of Cambridge - Judge Business School ( email )

Trumpington Street
Cambridge, CB2 1AG
United Kingdom

HOME PAGE: http://www.jbs.cam.ac.uk

Michael G. Pollitt

University of Cambridge - Judge Business School ( email )

Trumpington Street
Cambridge, CB2 1AG
United Kingdom
+44 (0) 1223 339615 (Phone)
+44 (0) 1223 339701 (Fax)

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